Vu and Pham SpringerPlus (2016) 5:203 DOI 10.1186/s40064-016-1912-3
RESEARCH
A dynamic approach toassess international competitiveness ofVietnams garment andtextile industryHuong Thanh Vu* and Lam Cat Pham
Abstract Garment and textile (G&T) industry has been playing as a driving force for the socio-economic development of Viet-nam. With the international integration process and rising challenges from the global market, there is a need to exam-ine international competitiveness of Vietnams G&T industry to find out what Vietnam should focus on to enhance its position in the global market place. This paper, by using the Generalized Double Diamond Model (GDDM), analyzed international competitiveness of Vietnams G&T industry and compared it with China. The results showed that Vietnam was less competitive than China in all four attributes of the GDDM. The lowest competitiveness of Vietnam in com-parison with China was Related and Supporting industries, followed by Factor Conditions. Therefore, the paper argued that although Vietnam should improve all of the four attributes in the long term, Vietnam must put a high priority on developing Related and Supporting Industries and then enhance Factor Conditions while maintaining its strengths over China in terms of G&T export growths and favorable business context.
Keywords: Garment and textile, Vietnam, China, International competitiveness, Generalized Double Diamond Model
2016 Vu and Pham. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
BackgroundIn Vietnam, garment and textile industry (G&T) has been a key exporting industry and contributed considerably to the social and economic development. In 2014, G&T was the second biggest exporting industry and contributed 11.51 % to the total GDP of Vietnam (General Depart-nment of Vietnam Customs 2015). In the international market, with the share of nearly 3 % in the world G&T exports in 2013, Vietnam has become the 7th biggest G&T exporter after China, the EU, India, Turkey, Bang-ladesh and the US (ITC 2015). Together with the increas-ing integration in the global marketplace, Vietnams G&T industry is facing with fiercer competition from other competitors. In order for the G&T industry of Vietnam to compete successfully and move up in the international G&T market, the understanding of its international com-petitiveness is of great importance.
International competitiveness is viewed as a strate-gic phenomenon inherent in the fields of international marketing, international business and international management, and refers to the attributes that make organizations more competitive than others in the global market. Organizations can be understood broadly as a region, a nation, an industry or perhaps a strategic group. Therefore, the term international competitive-ness is a multi-level phenomenon working in the global market (Hult 2012). Porter (1990) argued that the com-petitiveness is created, not inherited and claimed that the source of competitiveness is the competitive advantage, which is created and sustained through a highly local-ized process. Porter (1990) described the competitive advantage as four main attributes that allow an organi-zation to outperform its competitors. Those attributes, individually and as a system, constitute the Diamond Model of national advantage, which serves as a play-ing field that each nation establishes and operates for its industries. The competitiveness will increase when each of these attributes is improved. Based on Porter (1990) and DCruz and Rugman (1993), the Generalized Double
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*Correspondence: [email protected] Faculty of International Business and Economics, University of Economics and Business, Vietnam National University Hanoi, 144 Xuan Thuy, Cau Giay, Hanoi, Vietnam
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Diamond Model (GDDM) introduced by Moon et al. (1995, 1998) viewed international competitiveness as a broader term to incorporate multinational activities and government in the Diamond Model. At the sector level, DCruz (1992) argued that international competitiveness of an industry is the collective ability of firms in that sec-tor to compete internationally. According to Momaya (1998), international competitiveness at industry level is often considered as the results of strategies and actions of firms operating in that sector. Competitiveness is also represented by the relative productivity and its ability to create value added. It allows an industry to maintain and improve position in the global market and can only be assessed by comparing with the same industry in another country (Depperu and Cerrato 2005). With all the ideas above, international competitiveness of an industry in short can be understood as its ability to compete interna-tionally and can be measured through different attributes in comparison with the same industry in other nations.
Even though Vietnams G&T industry is a common topic for researchers in Vietnam, the previous literature on its international competitiveness is limited. The past studies examining international competitiveness of Viet-nams G&T adopted three main approaches namely the value chain, strengths, weaknesses, opportunities and threats (SWOT) and the Diamond Model of Michael Porter. Vitas (2006) used SWOT and value chain analy-sis to assess Vietnams G&T international competitive-ness through a great deal of indicators, for example cost, production time, customs procedures, policies and sup-porting industries in comparison with some main com-petitors such as China, India, the US, Bangladesh and Thailand. A mixed picture was pointed out in the paper and eventually it was not clear of whether Vietnams international competitiveness in G&T industry was higher or lower compared to that of other competitors. Also using the value chain approach, Truong etal. (2010), Dang and Dinh (2011), and Luong (2012) argued that Vietnams G&T international competitive was still low because of its participation in the lowest end of global G&T value chain. Nguyen (2012) using SWOT and the Diamond Model, and IPP and CIEM (2013) adopting the value chain and the Diamond Model drew out the same conclusions that Vietnam was at low international com-petitiveness mainly because of its dependence on the outside raw material, weak supporting industries and low productivity. Asian Foundation and CIEM (2012) also found out that Vietnams G&T international competitive-ness was modest and affected by tariff, customs, financial policies, labor, technology, materials input, market, and products quality. The previous studies recommended that in order to improve the international competitive-ness of Vietnams G&T industry, Vietnam should increase
the localization rate, develop Vietnams brand name, and increase the added value to move up in the value chain.
The nature of international competitiveness of an industry as stated above is its ability to compete inter-nationally and must be assessed by comparing with the same industry in other countries. One common point of all previous papers relating to international competi-tiveness of Vietnams G&T is that although they were informative to describe the current development of this industry, they failed to measure or quantify international competitiveness of Vietnams G&T aggregately in indexes and therefore it is hard to position Vietnams interna-tional competiveness in the global marketplace. In addi-tion, the past studies proposed a wide range of measures for Vietnams G&T industry but the priority measures were unclear. To fill this gap, the paper concentrates on analyzing and measuring international competitiveness of Vietnams G&T industry by using the GDDM. With this methodology and framework, the contribution of this paper is twofold. Firstly, the paper develops a specific framework for assessing international competitiveness of G&T industry. Secondly, this is the pioneering study adopting the GDDM to examine international competi-tiveness of an industry in Vietnam.
In this paper, the GDDM, with the analysis of both domestic and international attributes, helps answer how internationally competitive Vietnams G&T is quantita-tively compared to the benchmark country, China, and draw out better implications for Vietnam to improve international competitiveness of G&T industry. The paper is structured as below. After the introduction, the second part introduces the framework used while the third part explains the methodology and selection of proxies for the GDDM. In the next part, the paper pre-sents the main results on international competitiveness of Vietnams G&T and the final part points out some conclusions and implications, which are essential for Vietnams G&T industry to enhance its international competitiveness in the future.
Analytical frameworkAmong the models that are adopted to explain nation or industry competitiveness, the widely used one is Michael Porters Diamond Model introduced firstly in Porter (1990). According to this model, four main attributes that underlie conditions or platform for determination of the national competitive advantage are Factor conditions, Demand conditions, Related and Supporting Indus-tries, and Firm Strategy, Structure and Rivalry. Porter (1990) also proposed government polic
